Canadians of every income class are paying a new (and rising) 23% import and travel tax for the privilege of having a dollar that’s free to bob like a cork—a cork that magically accommodates Ottawa’s management manual for Canada’s internally loose and externally entangled economy. Do they in return, however, receive superior government for keeping a standalone, supposedly market-priced Canadian dollar?
Paul Krugman and other Keynesian scholars living offshore in New York and London admire our cork and believe that eurozone members—especially Greece—are suffering terribly because they no longer have corks of their own floating, in a sea of trouble.
The Canadian Nobel Prize economist Robert Mundell developed an alternative concept of transnational Optimal Currency Areas that helped convince the 17 eurozone governments to replace their individual currencies by creating the euro, in 1999. They hoped their OCA inspiration would do a better job of expanding prosperity and peaceful trade than continuing to let Europe’s tangle of national borders justify its tangle of currencies.
Canada’s state intelligentsia, to this day, barely gives the case for a transnational Canada-US currency the time of day. Overwhelmingly, those in the know insist that the status quo is optimum, that Canada’s economy is too different from that giant economy to the south to forgo having a cork of its own. And besides, why would our cork interest global thinkers in Washington?
As is so often the case, economic jargon and wonky gossip disguise raw self-interest and legitimate politics.
Friends of the Canadian dollar place the pursuit of national full employment and income equality over the pursuit of wider regional efficiencies and productivity. Proponents of a wider currency area, on the other hand, stretch “optimum” for the sake of distant liberal free trade benefits. Twentieth-century vested interests—in Canada’s auto industry, for instance—use “optimum” to justify not buying anything that’s not a perfect fit, immediately.
Certainly, the gap between the mixed economies of Germany and Greece is painfully greater than the six national borders between them. However, that gap between Canada and the US depends today less on one border and more on exactly where you live and work within either federation. Keynesians in both capitals are chasing the same economic growth imperative, almost in tandem, quarter-after-quarter, and, instantly, over the phone in emergencies.
North American business site-locators and investors carefully study regional census data, business cycles, and shifting consumer preferences. They worry little, however, about the respective professionalism of regulators and public servants or the chances of a comeback by Marx in Saskatchewan or even radical left or right separatists in Quebec or anywhere else. Cross-border Canadian and American white-collar and blue-collar workers ask about the quality of local schools, not whether they’ll be shunned in the workplace and in neighborhood stores.
Still, being human, government monetary economists are not likely to decide en mass that their lucrative, highly technical skills are unnecessary and serve an unnecessary currency. They will continue to believe and avow that there exists no sophisticated alternative to the Canadian status quo.
Okay, they needn’t be muzzled—but they shouldn’t own the podium.
Whatever the ideological hype of their government, the Greek public overwhelmingly favors keeping the euro and seems ready to keep sacrificing to avoid going back to the glorious days of a sovereign drachma.
The euro represents in Greece not merely peace of mind for tourists and foreign investors, but now also genuine restraint on mischievous Greek governments that, in the past, artificially inflated their economy in order to finance extravagant and crony government. And while the eurozone doesn’t have a formal “sharing” fiscal union to complement its currency union, Greeks surely note that Greece has received—and is receiving—hundreds of billions of euros in help, in large part, because it’s in the euro currency union.
Greek middle classes and entrepreneurs are asserting the benefits of a common currency, believing it serves their interests, if not the interests of individual state managers. Canadians aren’t hurting as much and are more deferential.
Yet Canada is an exceptionally safe place to think out loud. We’ve done ourselves little harm when we’ve tried it before.
The Bank of Canada isn’t holding a gun to our heads. It merely represents a set of pro-loonie defenses that puff up the benefits of the loonie and shrug away the price we pay in forgone purchasing, in lower productivity, and in our ability to move money, products, labor, and ideas back and forth across our defenseless border.